International climate finance

Warsaw Climate Change Conference Brings Modest Progress in Climate Finance but Leaves Important Questions Unanswered

The annual international climate change summit took place in the Polish capital, Warsaw, in November last year. As in the previous year, the issue of international climate finance attracted lengthy and controversial debate, remaining unresolved until the last minute. In fact, several decisions around funding were only made during ‘extra time’ at the end of the conference. Progress was made in fleshing out some of the demands on the industrialized nations. However, it remained unclear whether the target of US$100 billion in finance per year from 2020 onward would be reached – and if so, precisely how. Concrete commitments to additional funding in the next few years were also thin on the ground.

The most important funding questions in Warsaw were: What should be the future shape of climate finance after the fast-start finance period (which ended in December 2012)? And how do the industrialized nations plan to achieve their goal of mobilizing an annual US$100 billion of international climate finance by 2020? Some developing countries called for an interim financing target for 2016, though no agreement was reached on this. And some developed countries – unfortunately not all of them – sent an important signal by announcing their planned climate funding for at least the coming year or years. The German Minister of the Environment, for example, announced that Germany would set aside at least €30 million for the Adaptation Fund in 2013, and that he expected Germany’s overall climate funding in 2014 to continue at the same level as 2013. That would amount to €1.8 billion. Yet according to our own calculations, serious cuts are actually on the cards for 2014.

Even if there was no agreement on specific interim targets, several important commitments were made regarding a pathway for scaling up future climate finance. Developed countries have been urgently requested to ensure a sustained mobilization of public resources for climate finance – at rising levels (starting from the level of the fast-start finance period) and in line with the US$100 billion target. The stress on increasing public funding and on continuity is particularly important, in view of the current controversy around the share of private-sector finance that can be counted toward the annual target of US$100 billion. In this sense, the explicit reference to increases in public funding is especially welcome.

Another decision was that every two years, starting with the climate change summit in Lima this year, industrialized countries will now have to submit an official document presenting their strategies and approaches for scaling up climate finance. Compared with the previous year, when developed nations were ‘invited’ to make such submissions, this year’s decision gives much clearer guidance on what needs to be included. This should mean that the submissions are less imprecise than before, setting out more detailed plans. The agreement in Warsaw also turned the ‘invitation’ into an obligation to submit – an important point, because not every industrialized nation accepted the invitation in 2013. As a result, information on climate finance planning was not available for all developed countries.

Another welcome contrast with last year is the establishment of a clear process for making use of the documents submitted. The plan is for them to feed into a general discussion of long-term finance, at regular workshops held during climate negotiations. This will ensure that an important topic – also key to the negotiations around the new climate agreement in 2015 – remains on the agenda even after the work program on long-term finance has officially come to an end.

With respect to the Green Climate Fund (GCF), at its fifth meeting, held before the summit, the GCF Board resolved that resource mobilization for the Fund should start within three months of decisions being reached on eight preconditions. The first two Board meetings in 2014 will focus on these eight policy areas, so that an initial replenishment round can take place the same year. At the Warsaw summit, the GCF Board was once again requested to reach the necessary decisions as soon as possible as a basis for the replenishment process to begin. Developed countries were also asked to make early and ambitious pledges to the Green Climate Fund, and it was stressed that the first round of pledges should name very significant amounts. Even if “very significant” is a rather vague term, it does indicate the high expectations being placed on this first round of pledges in 2014. This is all to the good, given that the GCF is intended to become the largest and most important climate fund.

Another important theme in Warsaw was the Adaptation Fund, which is currently experiencing severe financial problems. Because its main source of income is a 2% levy on the certified emission reduction credits issued by the Clean Development Mechanism, the plunging price of CERs has impacted very seriously on the Adaptation Fund’s income. For this reason, in 2013 the Adaptation Fund Board had set a fundraising target of US$100 million in pledges. Thanks to commitments by several European countries, including Germany, at the Warsaw conference, this target was met and even slightly exceeded. That is an important success – yet it amounts to a mere 0.1% of the 100 billion a year supposed to be mobilized from 2020 onward.

Linde Grießhaber, David Eckstein